MAS prescribes conditions for deferring reporting of customer/counterparty information relating to OTC derivatives contracts
30 January 2019
The regulatory framework for reporting of over-the-counter (“OTC”) derivatives contracts is set out in Part VIA of the Securities and Futures Act (“SFA”) and the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 (“Regulations”). Financial institutions and other persons with significant derivatives activities who are parties to a specified derivatives contract that is traded and/or booked in Singapore may be subject to the reporting obligations (“Reporting Entity”). A Reporting Entity is required to report certain prescribed information in respect of specified derivatives contracts to a licensed trade repository or licensed foreign trade repository. The Regulations provided for relief to a Reporting Entity to mask customer or counterparty information in respect of specified derivatives contracts that were entered into before 1 January 2019 in certain circumstances, if the Reporting Entity is prohibited or restricted by banking confidentiality laws from reporting such information.
On 1 January 2019, the Regulations were revised to specify the conditions for deferring the reporting of customer or counterparty information in the following circumstances:
- A Reporting Entity is prohibited under the laws of a jurisdiction prescribed in the Fifth Schedule to the Regulations (“Fifth Schedule”) from reporting such information; and
- A Reporting Entity is prohibited under the laws of any jurisdiction from reporting such information on specified derivatives contracts entered into before 1 January 2019 but may do so only with the consent of its customer or counterparty.
Reporting Entity prohibited under laws of jurisdiction prescribed in Fifth Schedule from reporting customer or counterparty information
A Reporting Entity may defer the reporting of customer or counterparty information relating to a specified derivatives contract if it is completely prohibited under the laws of the jurisdictions specified in the Fifth Schedule from reporting such information. These jurisdictions include Singapore, India, China, Switzerland, etc.
However, if the laws of the jurisdictions specified in the Fifth Schedule which prohibit the reporting of customer or counterparty information relating a specified derivatives contract are subsequently revoked on a specified date, the Reporting Entity is required to report such information by 1 July of the year immediately following the specified date. A Reporting Entity is only required to report the customer or counterparty information relating to a specified derivatives contract that remains outstanding as at the applicable reporting deadline.
Reporting Entity prohibited under laws of any jurisdiction from reporting customer or counterparty information but may do so only with consent of customer or counterparty
If the laws under any jurisdiction allow a Reporting Entity to report customer or counterparty information relating to a specified derivatives contract only with the consent of its customer or counterparty, the Reporting Entity may defer the reporting of such information if it has made reasonable efforts to obtain the necessary consent but is unable to do so by the time reporting is due. This relief only applies to a specified derivatives contract that was entered into before 1 January 2019. The Reporting Entity may defer reporting the customer or counterparty information to no later than 1 July 2019.
On or after 1 July 2019, if the Reporting Entity continues to be subject to the requirement to seek consent for the reporting of customer or counterparty information and it has not been able to obtain the necessary consent despite having made reasonable efforts, the Reporting Entity is allowed to report the customer or counterparty information within a month from the date that:
- the necessary consent is obtained; or
- the requirement to seek consent is no longer applicable to the derivatives contract in question,
whichever is earlier.
The MAS Frequently Asked Questions on the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 (“MAS FAQs”) provide guidance on how a Reporting Entity may demonstrate that it has undertaken reasonable efforts to obtain the necessary consent of its customer or counterparty. MAS expects a Reporting Entity to put in place written policy and procedures as well as internal controls that set out when or how often to make requests for the necessary consent or to repeat requests for such a consent, for example, upon changes in law, or when the customer or counterparty requests to enter into new trades, or on a certain time frequency. The Reporting Entity is expected to take actions towards a customer or counterparty who has yet to provide the requisite consent or refuses to provide consent, for example, to suspend trading relationships until consent is obtained.
Reporting of customer or counterparty information is only required for specified derivatives contracts which remain outstanding as at the applicable reporting deadline. There is no relief provided for specified derivatives contracts entered into on or after 1 January 2019.
Reference materials
Please click here for the MAS FAQs that are available on the MAS website www.mas.gov.sg.